by Peg Downey
Most GLBT federal employees believe that it is not possible to leave a portion of their CSRS or FERS retirement annuity to their life partner. Actually, that is not true. A federal employee has the option, when (s)he retires, to elect an "Annuity With Benefit to Named Person Having an Insurable Interest." If two individuals own property together, share a mortgage and household expenses, they have an insurable interest.
If an employee wishes his partner to be the recipient of an annuity benefit at his death, his own annuity is reduced by a percentage amount that depends on the difference between his age and the age of the person with the insurable interest. If someone is older than the employee, the pension is reduced by 10%; if someone is 5-10 years younger, the reduction is 15%.* The "insured interest" survivor gets 55% of the reduced annuity.
Note, however, if the person named as having an insurable interest dies before the employee, the annuity will be restored to its unreduced rate. This approach is similar to buying insurance for a partner and needs to be compared to a life insurance policy. Nonetheless, because the survivor annuitant's benefit is partially subsidized by the feds, it's often hard to beat this deal.
* Older, same age, less than 5 years younger than employee……
10% reduction in annuity of retiring employee
5 but less than 10 years younger…………15% reduction
10 but less than 15 years younger………..20% reduction
15 but less than 20 years younger………..25% reduction
20 but less than 25 years younger………..30% reduction
25 but less than 30 years younger………..35% reduction
30 or more years younger ………………..40% reduction